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RESERVES Based on an independent engineering evaluation conducted by Gilbert Laustsen Jung Associates Ltd. (“GLJ”) effective December 31, 2004, and prepared in accordance with NI 51-101, ARC had proved and probable reserves of 244 mmboe.(1) Reserve additions from exploration and development activities (including revisions and economic factors) were 17.6 mmboe while 6.7 mmboe were added through acquisitions, bringing the total additions to 24.3 mmboe. This represents 117 per cent of the 20.8 mmboe produced during 2004. Dispositions of 9.2 mmboe resulted in net reserve additions for the year of 15.1 mmboe. As a result of the disposition activity, year-end 2004 reserves are 6 mmboe less than the 250 mmboe of proved plus probable reserves recorded at year-end 2003. Proved developed producing reserves represent 63 per cent of proved plus probable reserves, while total proved reserves account for 80 per cent of proved plus probable reserves. These percentages are virtually unchanged when compared to 64 and 81 per cent, respectively at yearend 2003. At a 10 per cent discount factor, the proved producing reserves make up 76 per cent of the proved plus probable value, while total proved reserves account for 87 per cent of the proved plus probable value. Approximately 51 per cent of ARC’s reserves are crude oil and natural gas liquids and 49 per cent are natural gas on a 6:1 boe conversion basis.

Net Present Value (“NPV”) Summary 2004 ARC’s crude oil, natural gas and natural gas liquids reserves were evaluated using GLJ’s product price forecasts effective January 1, 2005 prior to provision for income taxes, interest, debt service charges and general and administrative expenses. It should not be assumed that the discounted future net production revenues estimated by GLJ represent the fair market value of the reserves. NPV of Cash Flow from Using GLJ January 1, 2005 Escalated Prices and Costs NI 51-101 Net Interest ($ thousands)

Proved producing Proved developed non-producing Proved undeveloped Total proved Probable Proved plus probable

Undiscounted

Discounted at 5%

Discounted at 10%

Discounted at 15%

Discounted at 20%

3,055 52 596 3,703 1,037 4,740

2,249 32 364 2,645 517 3,161

1,817 24 234 2,076 313 2,389

1,546 19 155 1,720 213 1,933

1,357 15 103 1,475 155 1,630

GLJ January 1, 2005 Price Forecast

Year

West Texas Intermediate Crude Oil

Edmonton Light Crude Oil

Natural Gas at AECO

Foreign Exchange

($US/bbl)

($Cdn/bbl)

($Cdn/mmbtu)

($US/$Cdn)

$42.00 $40.00 $38.00 $36.00 $34.00 $33.00 $33.00 $33.00 $33.50 $34.00 $34.50 2.0%/yr

$50.25 $47.75 $45.50 $43.25 $40.75 $39.50 $39.50 $39.50 $40.00 $40.75 $41.25 2.0%/yr

$6.60 $6.35 $6.15 $6.00 $6.00 $6.00 $6.00 $6.00 $6.10 $6.20 $6.30 2.0%/yr

0.820 0.820 0.820 0.820 0.820 0.820 0.820 0.820 0.820 0.820 0.820 0.820

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Escalate thereafter at

(1)

14

Boe’s may be misleading, particularly if used in isolation. In accordance with NI 51-101, a boe conversion ratio for natural gas of 6 mcf:1 bbl has been used, which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

ARC ENERGY TRUST

2004  

Annual Report

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